Shell was the term used to refer to a program's body and outward digital appearance.
All of the Artificial Intelligence programs within the Matrix carried human-looking shells to conform with humanity's appearances and so as not to cause bluepills to question the world they lived in.
Much like humans, the programs rarely described their digital bodies as shells owing to the fact that the programs had no other bodies. However, programs' shells inside the Matrix were only semi-permanent and programs were able to, with great difficulty, change their shells.
The Oracle used the term when she referred to her shell being changed after changing appearances. She did this to escape being killed by the Merovingian, whose kill-code had locked on to the particular shell the Oracle previously inhabited.